September 10, 2014 | Quote

Germany, Czech Republic Seek to Conduct “Business as Usual” with Iran

On Sunday, Benjamin Weinthal documented the expansion of business ties between Iran, Germany and the Czech Republic, which have been undermining the leverage that sanctions initially provided in the P5+1 nuclear negotiations with the Islamic republic.

Weinthal reports that the Czech Republic is scheduled to “send 20 companies to Tehran on Saturday to jump-start business contacts,” the first trade mission of its kind.

According to Radio Prague, “In 2012, trade between the Czech Republic and Iran amounted to some 1.2 billion… crowns, down from 2.4 billion registered in 2003, before the country’s accession to the European Union.” The country’s international news outlet added that “Czech firms mainly export machinery products, electrical goods, and other products to Iran, while the bulk of imports from Iran consists of fruit and vegetables.”

Germany appears poised to restore the level of trade it enjoyed with Iran prior to the start of the Security Council’s sanctions.

Meanwhile, neighboring Germany is positioning itself to recapture its €5 billion-plus trade relationship with the Islamic Republic. The Wall Street Journal reported in an August titled article “German Businesses Warm to Iran” that a two-day conference on Iran in Frankfurt in July drew 40 companies from the machine and factory-engineering industries. Topics included “market entry options, investment rules, sanctions and Iranian politics.”

Weinthal quotes Michael Rubin, a scholar at the American Enterprise Institute, who warned that “[a]s Iran redoubles its investment in its military, nuclear and ballistic missile programs, the region will be paying the price for years to come for allowing Iran such a cash windfall without winning anything in exchange.”

In Iran is *Really* Good at Evading Sanctions, published in the December 2013 issue of The Tower Magazine, Emanuele Ottolenghi described how Iran circumvents sanctions in its dealings with Germany.

With financial constraints on Iranian businesses piling up and the country’s banks rendered impotent by sanctions, Iran must be creative in order to transfer and manage the funds necessary to finance its procurement activities. Two companies that have been very active in investing Iranian government money in Germany are IFIC Holding and IHAG Trading—both of which are subsidiaries of the Iran Foreign Investment Company (IFIC) and sanctioned by the US. IFIC is the investment arm of Iran’s Oil Stabilization Fund; its purpose is to use Iran’s oil revenues to offset the ups and downs of the oil market, which have been significant for Iran, given that Iranian oil is now a distressed asset (a product that has to be sold at below market price) due to sanctions. IFIC annually invests hundreds of millions of dollars overseas, mostly in Germany, where, according to its website, 56.9 percent of its investments are held. Despite American sanctions, which have targeted IFIC since July 2010, the company’s German subsidiary still manages a portfolio worth hundreds of millions of dollars. According to IFIC’s latest published financial returns (2011), its investments included owning 4.5 percent of the massive German conglomerate Thyssenkrupp and a minority share in a factory, IPM Industrie Plannung und Montage, which produces and assembles components for the energy industry.

Despite being a regime-owned company, IFIC Holding and its subsidiary IHAG Trading are incorporated in Germany. This means that unless German authorities can show proof of wrongdoing specific to its German subsidiaries, IFIC can continue to operate, invest, buy, and sell on German soil. IFIC’s Thyssenkrupp shares generate millions of Euros in dividends every year, which the company can then spend or reinvest as it pleases.

Read full article here.